Monday, February 16, 2009

Today, most people who are covered by a commercial health insurance plan get their care from some kind of a “network” established by the plan. If they select a healthcare provider that’s included in the network, they pay less for care than if they select a provider outside the network. But they generally pay the same price for care inside the network, no matter which provider they pick, even if that provider’s costs are higher than another’s.

As a result, it’s up to the health plan to keep costs down by negotiating with providers about the price they will accept to be included in the network. As in any negotiation, success depends heavily on the ability to walk away from a negotiation. Small providers rarely feel that they can walk away no matter what a plan demands. And that leads to pressures for small providers to consolidate or organize themselves to increase their negotiating power.

However, because most consumers like to have maximum choice of providers, health plans also seek to make their networks as broad as possible. As a result, the plans’ ability to walk away from the negotiation is diminished, and consequently their ability to hold costs down through this method is also diminished.

This has led to a desire to make networks narrower, in order to create stronger negotiating pressure. Indeed, there have been recommendations that Medicare should be authorized to estabish a network like a commercial plan and to extract even greater price concessions from providers for being included.

The phrase “we need to think outside the box” was invented for situations just like this. As long as people perceive that the only way to organize healthcare is for payers to create networks of providers that consumers will use, it will be impossible to ever find a solution to the “broad access” vs. “cost control” tradeoff.

A completely different paradigm is needed, and fortunately, it’s already been tried and it works. Let providers form networks, and let consumers choose between them based on cost and quality. The Patient Choice system in Minnesota has done this — providers organize themselves into care systems (they don’t have to be formal integrated systems under a single corporate ownership). The care systems define their prices for providing comprehensive care to consumers, and the consumers pay more if they use a higher-price system. Consumers have complete freedom as to which care system they use – they’re not constrained to choose from a subset selected by the plan. Consumers pay more if they use systems with lower value, but it’s not because the provider is in or out of a plan’s network, it’s because that provider is part of a system that has decided to charge more. Importantly, care systems function more like true coordinated systems of care with a focus on managing cost and quality, whereas current “networks” are little more than lists of uncoordinated providers. Providers organize themselves into systems to do a better job of managing costs and quality, rather than to increase their negotiating power with health plans.

It’s hard to imagine how Medicare would ever be able to establish a network in the way commercial health plans currently do. But it’s not hard to imagine how Medicare could create a Patient Choice-style system. It would simply ask Medicare providers to form networks/care systems and “bid” to provide Medicare services, i.e., define the price that they will charge for caring for beneficiaries. Medicare wouldn’t select the winning bidder — the Medicare beneficiary would. Lower-price networks/care systems with equivalent quality would get more Medicare beneficiaries as patients, which would encourage the providers in the other networks to become more efficient so they could lower their costs. It’s worked in Minnesota with much smaller patient volume — imagine the impact if Medicare were to participate.

It may sound radical, but it’s not all that different from the Medicare Advantage program, where beneficiaries choose a health plan based on its cost and quality, and the health plan then contracts with providers to deliver the care. The Patient Choice model uses the existing fee-for-service structure for both billing and payment, which makes it easy for providers to participate.

Friday, February 13, 2009

Many people seem to believe that the only thing standing between us and a completely transformed healthcare system that has higher quality and lower cost is the lack of Electronic Health Record (EHR) systems in every physician’s office.

That’s a little like saying that the only reason the country is in a recession is that every American doesn’t have a Blackberry to improve their productivity.

There’s no question that many aspects of care coordination and quality improvement are very difficult for healthcare providers to deliver without appropriate health IT support. It’s inefficient and impractical to flip through paper patient charts to find out which patients are due for an immunization or a diabetic checkup, when a simple query of an electronic database could provide the answer quickly and easily. It’s inefficient and problematic for hospitals and primary care practices to be faxing each other admission and discharge information in order to coordinate care transitions when the information could be electronically transmitted and stored in a common electronic health record.

But merely having an EHR doesn’t guarantee that providers will, in fact, deliver better care to diabetics or more effectively coordinate hospital care and discharges. The physician practice and/or hospital must still redesign the actual processes of care to achieve those goals. The EHR can make that possible, or at least much easier, but only if the EHR is designed in a way that actually supports the improved care processes.

And therein lies the rub — it’s hard for today’s EHR systems to be designed to support improved care processes, when the improved care processes don’t exist. Indeed, it’s likely that, if anything, today’s EHRs will best match the way providers work today, rather than the way we want them to work in the future.

For example, most studies have found that the key computer support for improved management of chronic disease patients, preventive care, etc. is a patient registry. Yet most commercial EHR systems do not have, or do not come with, a registry component. Similarly, it’s not surprising that the only research showing an impact of EHRs on quality is from healthcare systems which developed EHRs in-house, since it’s more likely that an EHR will match care delivery processes if it’s developed in cooperation with the practitioners who will use it, rather than independently by an IT company.

Does that mean we should not be pushing aggressively for development and implementation of EHRs? No, but it means that we shouldn’t be pushing for EHRs in isolation – they should be developed and implemented as integral parts of quality improvement initiatives, ideally at a regional level, rather than provider by provider.

Wednesday, February 11, 2009

One of the goals many people have for federal and state healthcare reforms is to eliminate “medical underwriting” by health insurers, i.e., refusals to provide health insurance coverage for those with existing illnesses and conditions. How to do this — individual mandates, employer mandates, single payer, etc. — remains controversial, but the goal is widely shared.

If health plans can’t medically underwrite, how will they compete? Victor Fuchs, in a recent article in Health Affairs, says “If insurers have to provide a standard benefit package with guaranteed issue and no pre-existing disease exclusions, receive risk-adjusted premiums, and have their outcomes monitored, they will have a strong incentive to change their business model from excluding sick patients to actually managing care for efficiency and value. This is how competition can work to control costs.”

In another corner of the health reform arena, there’s deep concern about the decline in primary care and a major push for supporting creation of the patient-centered medical home. One of the core principles of the medical home is to provide comprehensive management and coordination of a patient’s care.

So which is it? Do we want health plans to manage our care, or do we want primary care practices to do it? The experience of the 1990s indicates pretty strongly that people don’t like health plans managing their care. (Based on the same experience, it’s not even clear that people like primary care practices doing it either, but the PCP gatekeeper role then was being driven by the health plan, not the practice itself.)

Yet most health plans have created an extensive care management infrastructure inside their own walls and they are already competing for business based on how extensive it is. Drive down the highway in any major city or turn on the TV to see the proliferation of advertisements by health plans. The message (unfortunately) isn’t how much less they cost, but how much they can help you manage your health care.

So not surprisingly, one of the challenges in implementing medical home initiatives is that the improved services in the medical home appear to duplicate services the health plan already claims to be delivering. Why should the health plan pay primary care practices more so they can hire nurse care managers, when the health plan is already paying for them on the health plan’s own staff, and advertising that that’s a way they control costs? Why should the health plan pay more for a physician practice to install IT systems, when the health plan already claims to provide extensive data and decision support to help physicians better manage their patients?

The problem with having these services at the health plan, rather than the physician practice, is that they cannot be effectively integrated into care delivery for patients. Health plan care managers try to help patients manage their care independent of the physician, when care management and physician treatment should be closely coordinated. Physicians need one effective IT system they can use for all of their patients, not a half dozen systems, each of which only works for the patients from a particular health plan.

In order to truly fix the healthcare system, there will need to be a resolution to what, if any, care management services should be provided by health plans instead of by health care providers. The likely answer, at least in the long run, is “as little as possible.” There will always be some patients who can’t find or won’t use a medical home, and in those cases, the health plan (assuming the patients have a health plan) may be the only practical way to provide a semblance of care coordination. But if the goals of the medical home advocates are realized, there will be fewer and fewer such patients over time.

Moreover, resolving this also helps resolve one of the key barriers to implementing the medical home — maintaining budget neutrality. Health plans are reluctant to pay more for medical home services because it may increase spending with no guarantees of offsetting reductions in other costs. Yet an obvious place to achieve offsetting reductions is reducing the spending on similar services inside the health plans. Moreover, in light of the results of several recent studies showing low effectiveness of disease management programs, such a shift may result in better outcomes and lower costs.